Meeting of members and notice to Bureau.

306.3

Notice of meeting of members.

306.4

Notice of meeting to Bureau.

Special Reserve for Delinquent

Loans.

(a) The Regular Reserve of each Federal credit union shall be supplemented by a special reserve to be known as the Special Reserve for Delinquent Loans, which shall be equal to the excess of the sum of 10 percent of the unpaid balances of loans delinquent more than two months and less than six months, plus 25 percent of the unpaid balances of loans delinquent from 6 months to less than 12 months, and plus 80 percent of the unpaid balances of loans delinquent 12 months or more over the balance in the Regular Reserve. In the event it is necessary to supplement the Regular Reserve by a Special Reserve for Delinquent Loans, the transfer to the Special Reserve for Delinquent Loans shall be made as of December 31 of each year, and as of June 30 of each year if dividends are to be paid semiannually, from Undivided Earnings before any distribution of dividends. The maintenance of a Special Reserve for Delinquent Loans shall not eliminate the necessity for transferring net earnings as of the end of each dividend period to the Regular Reserve as required by paragraph (a) of § 302.2. In the event the required transfer exceeds the balance of Undivided Earnings, only the balance of Undivided Earnings shall be transferred to the Special Reserve for Delinquent Loans.

(b) When, as of the end of any dividend period, the amount in the Special Reserve for Delinquent Loans exceeds the amount required by the regulations in this part, the board of directors of the Federal credit union may authorize the transfer of the excess to Undivided Earnings.

(c) Upon written application by the board of directors of a Federal credit union, the Director may waive, in whole or in part, the requirement for the maintenance of the Special Reserve for Delinquent Loans contained in paragraph (a) of this section. Such applications shall be addressed to the Regional Representative.

306.5

Requirements for conversion.

Report of results of meeting to Bu

§ 306.1

Requirements for conversion. Any Federal credit union may convert into a State credit union by (a) complying with the requirements of the Act and the regulations in this part requisite to enabling it to convert to a State credit union; (b) taking such action as may be necessary under applicable State law for the conversion of Federal credit unions to State credit unions to obtain a State credit union charter; and (c) filing with the Bureau a copy of the State credit union charter issued to it within ten days after receipt thereof. § 306.2 Meeting of members and notice to Bureau.

Upon approval of the proposition to convert to a State credit union by a majority of the board of directors, it shall set a date for a meeting of the members, at which the individual members shall have the option to vote on the proposition either in person at the meeting or by written ballot to be filed on or before the date of the meeting. The board of directors promptly shall notify the Regional Representative in writing of its approval of the proposition to convert to a State credit union, and of the date set for the meeting of the members.

§ 306.3 Notice of meeting of members.

(a) Written notice of the meeting shall be delivered in person to each mem

ber or mailed to each member at the address for such member appearing on the records of the credit union, not more than thirty days nor less than seven days prior to the date set for the meeting.

(b) In addition to setting forth the proposition for conversion and the date, time, and place of the meeting, the written notice of the meeting shall (1) inform the members of the opportunity to vote by written ballot, and when, where and how (on or before the date of the meeting) such written ballots may be filed; (2) contain a form of written ballot for the use of those members who will vote thereby instead of in person at the meeting; and (3) set forth, for the advance consideration of the members, a brief and accurate statement of the reasons for and against the proposed conversion, including the effect, if any, it will have upon shareholdings and obligations of members, and the policies and practices of the credit union.

§ 306.4 Notice of meeting to Bureau.

A copy of the written notice of the meeting, verified by the affidavit of the secretary of the credit union, shall be delivered to the Regional Representative, at the same time, in advance of the meeting, that it is delivered to the members.

§ 306.5 Report of results of meeting to Bureau.

A statement of the results of the vote, verified by the affidavits of the president or vice president and the secretary, shall be filed with the Regional Representative within ten days after the vote is taken.

§ 306.6 Approval by majority of all members required.

In order for the proposition for conversion to be approved and acted upon further by the credit union it must receive the affirmative vote of a majority of all the members.

take such action on behalf of the credit union as may be necessary under the applicable State law for the conversion of Federal credit unions to State credit unions to convert the credit union to a State chartered credit union. In addition, the board of directors promptly shall inform the Regional Representative of the action so taken and, from time to time, of the progress of such action.

§ 306.8 Completion of conversion.

(a) Within ten days after the credit union receives a State credit union charter it shall file a copy thereof with the Regional Office. The Regional Representative promptly shall notify the credit union in writing of the receipt of the State charter. The credit union shall cease to be a Federal credit union as of the close of the business of the date such copy is received by the Regional Office unless the credit union has been notified in writing or is notified in writing to the contrary pursuant to paragraph (b) of this section. Upon ceasing to be a Federal credit union, such credit union shall no longer be subject to any of the provisions of the Act. The successor State credit union shall be vested with all of the assets and shall continue responsible for all of the obligations of the Federal credit union to the same extent as though the conversion had not taken place.

(b) Notwithstanding the provisions of paragraph (a) of this section, if the requirements of the Act and the regulations in this part have not been satisfied, the attempted conversion shall be ineffective and the credit union shall continue to be a Federal credit union, subject to the provisions of the Act, to the same extent as though the conversion had not been attempted. The Regional Representative promptly shall notify the credit union in writing either before or after the copy of the State charter is filed with the Regional Office, of any findings by the Bureau, including the reasons therefor, which adversely affect the validity of the attempted conversion.

is converting, pursuant to the provisions in this part, the Bureau will furnish information, assistance and advice which, in the discretion of the Director, is pertinent to the proposed conversion and consistent with the powers and duties of the Bureau under the Act.

(b) The Bureau will cooperate, to the extent deemed consistent with its powers and duties under the Act, with State agencies and State officials having responsibility under applicable State law for the issuance of charters to and the supervision of State credit unions, in questions and matters relating to the conversion of any Federal credit union to State charter pursuant to the Act and the provisions in this part.

§ 307.1

Requirements for conversion.

Any State credit union may convert into a Federal credit union by (a) complying with all the requirements of the State requisite to enabling it to convert to a Federal credit union, if any, or to cease being a State credit union; (b) filing with the Bureau proof of such compliance, satisfactory to the Director; (c) filing with the Bureau an organization certificate as required by the Act; and (d) filing with the Bureau proof satisfactory to the Director that all other requirements of the Act and the regulations in this part have been complied with.

§ 307.2 Preliminary application to con

vert.

(a) Any State credit union that desires to convert into a Federal credit

union may, after approval by its board of directors and prior to taking the steps prescribed in § 307.1 file with the Bureau a preliminary application for conversion. Such preliminary application shall be on a form, copies of which may be obtained from any Regional Office of the Bureau.

(b) A preliminary application for conversion shall be filed with the Bureau through the Regional Office. It shall authorize an examination of its books and records by the Bureau and contain an undertaking to pay the examination fee therefor in accordance with § 301.7 of this chapter.

§ 307.3 Information required with preliminary application.

(a) A preliminary application shall be accompanied by a current financial and statistical report, Form FCU 109, as revised, or a form substantially equivalent thereto, certified correct by the treasurer and verified by the affidavit of the president or vice-president of the credit union and a statement verified by the affidavits of the president or vice-president and treasurer of the credit union which shall contain (1) a statement of its policies and procedures with respect to loans to members, including interest rates and charges incident to making loans, maturities of loans, unsecured loan limit, types of security accepted, and requirements for amortization; (2) a list of all outstanding unsecured loans with unpaid balances in excess of $750; (3) a list of all outstanding loans with maturities in excess of 5 years; (4) a schedule of all loans which are delinquent two months or more; (5) a statement of the kinds of accounts (share, savings, deposit, or other) which members are required or permitted to maintain; (6) a description of its real property holdings; (7) a description of investments other than loans to members, loans to other credit unions, United States bonds, and shares in savings and loan associations insured by Federal Savings and Loan Insurance Corporation; (8) the names and locations of depositaries of its funds; (9) a description of any services rendered to or on behalf of members or the public other than accepting and maintaining accounts of members and making loans to members; (10) a statement of the field of membership.

(b) It shall be accompanied, also, by a preliminary plan of conversion which shall show what the credit union proposes to do about any of its policies, procedures, practices, assets and liabilities which do not comply with the requirements of the Act if its conversion to 8 Federal credit union should be approved.

§ 307.4 Approval of preliminary application to convert.

(a) The Director will consider the preliminary application for conversion, the financial and statistical report, the preliminary plan of conversion, and such other information or reports of examination or investigation as may have been submitted or required, and will accord such application conditional approval upon his determination that the credit union does or is able to comply with all the requirements of the Act. The Director will disapprove the preliminary application if he determines that the credit union is unable to comply with all the requirements of the Act.

(b) Upon disapproval of a preliminary application for conversion into a Federal credit union, the credit union, if it nevertheless believes that it is able to comply with all the requirements of the Act, may submit promptly additional information, including a new preliminary plan for conversion, for the reconsideration of the Director.

§ 307.5 Compliance with State laws.

Upon the conditional approval, either initially or upon reconsideration, of a preliminary application for conversion into a Federal credit union, the credit union shall proceed promptly to comply with all the requirements of the State requisite to enabling it to convert to a Federal credit union, if any, or to cease being a credit union of such State. After obtaining the vote of its members required by the laws of such State for the accomplishment of such purpose, the credit union shall proceed promptly to comply with all the conditions prescribed in the conditional approval of the preliminary application.

§ 307.6 Application for Federal charter.

(a) Upon compliance with all the requirements of the State requisite to

enabling it to convert to a Federal credit union, if any, or to cease being a credit union of such State, and upon compliance with all the conditions prescribed in the conditional approval of the preliminary application, the credit union may file with the Regional Representative an organization certificate, together with proposed bylaws, as required by the Act, which shall constitute its formal application for conversion into a Federal credit union.

(b) Such organization certificate and proposed bylaws shall be accompanied by evidence satisfactory to the Directory showing compliance by the credit union with all the requirements of the State requisite to enabling it to convert to a Federal credit union, if any, or to cease being a credit union of such State and compliance by the credit union with all the conditions prescribed in the conditional approval of the preliminary application.

§ 307.7 Completion of conversion.

(a) Upon approval of the organization certificate by the Director the credit union shall become a Federal credit union as of the date it ceases to be a State credit union. It shall be vested with all of the assets and shall continue responsible for all of the obligations of the State credit union to the same extent as though the conversion had not taken place.

(b) All directors and credit committee members holding office at the time the credit union becomes a Federal credit union shall hold office until the first annual meeting of the members of the Federal credit union and until the election and qualification of their respective successors, or until the qualification of their respective successors elected at a special meeting of the members as may be required pursuant to the provisions of paragraph (d) of this section.

(c) If a special meeting of the members is not required pursuant to the provisions of paragraph (d) of this section, the board of directors shall hold a legal meeting promptly upon the credit union becoming a Federal credit union. such meeting the board of directors shall elect such executive officers, appoint such committees, and transact such other business as is necessary to carry

At

into effect the conversion as approved by the Director and to operate the Federal credit union in accordance with the requirements of the Act.

(d) If required in the conditional approval of the preliminary application or upon approval of the organization certificate and bylaws, a board of directors, or a credit committee, or both, shall be elected at a special meeting of the members to be held promptly upon the credit union becoming a Federal credit union, all to hold office until the first annual meeting of the Federal credit union and until the election and qualification of their respective successors. At such

meeting such other action shall be taken as is necessary to carry into effect the conversion as approved by the Director and to operate the Federal credit union in accordance with the requirements of the Act. Immediately after such meeting the board of directors shall meet, elect such executive officers, appoint such committees, and transact such other business as is necessary to carry into effect the conversion as approved by the Director and to operate the Federal credit union in accordance with the requirements of the Act.

PART 308-MERGERS OF FEDERAL CREDIT UNIONS

Sec.

308.1 When permissible.

308.2 Preparation of merger plan.
308.3 Approval of plan by Director.
308.4 Approval by members.
308.5 Completion of merger.

AUTHORITY: The provisions of this Part 308 issued under sec. 21, 73 Stat. 635; 12 U.S.C. 1766.

SOURCE: The provisions of this Part 308 appear at 26 F.R. 842, Jan. 27, 1961, unless otherwise noted.

§ 308.1 When permissible.

Two or more Federal credit unions, the combined membership of which would have a common bond of occupation or association, or would be limited to groups within a well-defined neighborhood, community, or rural district, may merge into a single Federal credit union; or, two or more Federal and State credit unions, the combined membership of which would have a common bond of occupation or association, or would be limited

to groups within a well-defined neighborhood, community, or rural district, may merge into a single Federal credit union: Provided, That the State credit unions have the power and authority to merge under applicable State laws; or, two or more Federal and State credit unions, the combined membership of which would be eligible for credit union charter under applicable State law, may merge into a single State credit union: Provided, That the State credit unions have the power and authority to merge under the said applicable State law. Any such merger shall take place in accordance with the Regulations in this part, and, with respect to any State credit union involved in such merger, in accordance with the provisions of applicable State law.

§ 308.2 Preparation of merger plan.

Upon the approval of a proposition for a merger by the boards of directors of the credit unions, they shall prepare, or cause to be prepared for their approval, a plan for the proposed merger. The plan for the proposed merger shall include, but not by way of limitation, a current financial and statistical report of each credit union; an appraisal of the share value with respect to each credit union and the basis for the determination of such share value; whether differences in share values between the credit unions will be absorbed or adjusted, and, if there is to be an adjustment of such differences, how it will be accomplished; any provisions that are made with respect to reserves, undivided earnings and dividends; provisions with respect to notification and payment of creditors; provisions for bringing the assets and liabilities of any merging State credit unions into conformity with the requirements of the Act, if necessary, where it is proposed that the merged credit unions are to continue as a Federal credit union; and which of the merging credit unions is to continue and which will lose identity in the proposed merger. Also, if the merged credit unions are to continue as a Federal credit union, the plan should include any proposed amendments to the charter of the continuing Federal credit union.